Does the lender need to consider a Paycheck Protection Program (PPP) loan when analyzing a self-employed borrower?
The Paycheck Protection Program (PPP) is a loan issued by Small Business Administration lenders under the CARES Act. These loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. The existence of a PPP loan could be helpful information in analyzing the borrower's business. Lenders should apply due diligence and review the actions of the business and any impact the current situation has taken on the flow of income.
For more information, refer to the published Lender Letter LL-2020-03, Impact of COVID-19 on Originations.